Scandinavia’s SAS targets staff costs with hubs in London, Spain

STOCKHOLM (Reuters) – Scandinavian airline SAS will set up bases in London and Spain in a bid to cut staff costs and compete with budget carriers such as Norwegian Air and Ryanair.

Partly state-owned SAS flagged plans for its first hubs outside Scandinavia in December. They will be owned by a new Irish-registered company, it said on Wednesday.

Basing aircraft and employing pilots and cabin staff at leisure destinations in Europe, such as London and the Mediterranean, would lower labor costs, SAS chief executive Rickard Gustafson said.

SAS, which is partly owned by Sweden, Norway and Denmark, said it aims for the new hubs, which will have locally employed staff, to be up and running in about a year’s time.

Although salary levels would not differ much, total labor costs in Britain and Spain would be between 35% and 40% lower per employee than in Scandinavia, Gustafson told Reuters.

The major shareholders in SAS – Sweden owns 17% of SAS, Denmark 14% and Norway 12% – were supportive of the airline’s plan, which lifted its shares.

“SAS acts in a very tough market and works hard to be profitable,” Swedish Enterprise Minister Mikael Damberg said. “And that is a task for, and the responsibility of, the board.”

Norwegian Deputy Trade and Industry Minister Lars Jacob Hiim said Norway’s stake in SAS was a financial one.

“The Norwegian government is of course keen to protect Norwegian workplaces and ensure increased competitiveness,” he said in an emailed statement. “But it is the company’s board and management that take operational decisions.”

A Danish government spokesman said it supported the move of a small part of the SAS fleet of aircraft to London and Spain to ensure the company’s competitiveness.

SAS said costs for the start up of the Irish air-operator certificate (AOC) and its hubs would impact earnings initially, and positive earnings effects would come gradually.